U.S. West Texas Intermediate (WTI) crude futures were up $1.77 or 3.6% to $51.20 a barrel.
Brent crude oil futures were up $1.96, or 3.6%, to $55.78 a barrel. The Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia, a group known as OPEC+, weighed the impact on global oil demand, and economic growth, of the coronavirus outbreak at a meeting on Tuesday, hearing from China’s envoy to the United Nations in Vienna.
Producers are weighing further output cuts and moving a planned policy meeting to February rather than March.
“Oil’s sell-off is deep into oversold territory so we should not be surprised … if we see prices rebound a few dollars,” said Edward Moya, an analyst at broker OANDA.
But he warned the impact of production curbs might be cancelled out if problems persist longer-term in China, the world’s biggest crude oil importer and the main driver of global energy demand growth in recent years.
“This is a critical time for oil prices and even if we see OPEC+ deliver deeper production cuts, an extended shutdown of China will destroy demand for crude’s top importer,” Moya said.
Fears of a virus-related slump in global demand have flipped the oil market into contango this week – a structure in which longer-dated oil futures trade at a premium that encourages traders to keep crude in storage for more profitable resale in the future, potentially indicating months of surplus.
“At these prices, commodity producers will soon begin to cut back on production and investment,” Moody’s Analytics said in a note on Wednesday. “Given the economic damage caused (by the virus) prospects are poor that prices will recover soon.”
In other news ConocoPhillips issued a muted annual outlook on Tuesday, expecting oil demand growth to be hit by 100,000-200,000 barrels per day this year due to the outbreak of the virus in China.
The company also said it was tapering down production in Libya and expects no output “fairly soon”, following a force majeure between ConocoPhillips and the country’s National Oil Corp (NOC).
Meanwhile, U.S. crude oil stocks rose by 4.2 million barrels in the week to Jan. 31 to 432.9 million barrels, data from industry group the American Petroleum Institute showed on Tuesday. That was well above analysts’ expectations for a build of 2.8 million barrels.
The weekly report from the Energy Information Administration (EIA), an agency of the U.S. Department of Energy, is due later on Wednesday.